Tim Eadon, director at the independent financial advice firm Tuto Associates, made the comments that DB transfers will “come to a head when the stock-market falls”, at a recent roundtable event brought together by wrap platform Nucleus.
Changing dynamic
Eadon argued the changing dynamics of the market, due to pension freedoms, has meant there is a real risk of clients not understanding the consequences of a transfer.
“Pre-freedoms, a small percentage of your business might have drawdown cases, typically for high net worth clients and sophisticated investors.
“The government then literally opened up this whole market, without the product set really changing at all.
“A whole host of people have been thrown into this investment quagmire and been left thinking: ‘I really don’t understand what on earth is going on’,” Eadon said.
Getting transfers right
In order to ensure advisers get a DB transfer right, Eadon contended that annual client reviews had become so much more important, particularly when a client has moved in to drawdown.
Mike Seddon, managing director at advice firm Grayside Financial Services, agreed.
He said: “For DB transfers going into drawdown, it is absolutely critical that clients are engaging with their adviser, on at least an annual basis.”
Know the dividing line
Claire Trott, head of pensions strategy at Technical Connection, said pension freedoms mean advisers must now know where the dividing lines are with investments when it comes to outsourcing and DB transfer business.
“There are so many different models out there.
“I’m not saying any of them are right or any of them are wrong, but if you’re used to dealing with one who does the whole service and all the investments, and then you go to another one and they’re not doing the investment side, then you need to take responsibility for that,” Trott said.
